The government has agreed on a plan to retire debt owed to Sunon Asogli (Ghana) Limited Company, an independent power producer (IPP).
Checks by the Daily Graphic indicated that following a notice to shut down the plant last Monday evening, representatives of the government quickly held a meeting with officials of the power producer, which has 560 megawatts installed capacity.
The first of $30 million would be paid this week, while the remainder would be paid in the week of December 11, 2023.
The government owes Sunon Asogli alone in excess of $900 million, Daily Graphic checks found.
The debt is made up of arrears for monthly generation and consumption, amounting to nearly $500 million, with over $400 million in take-or-pay accumulation.
A source at the Ministry of Energy familiar with the agreement with the country’s first privately owned electricity generation installation said the dark clouds had cleared on the shutdown threat by the IPP which had the capacity to generate 560 megawatts (MW) of power.
However, a source close to the power generating company said it was difficult taking the decision to shut down the plant.
However, the hope was for the government to keep its side of the promise to pay the amount, else the company would be forced to shut down.
ECG reaction
Meanwhile, a source close to the management of the Electricity Company of Ghana (ECG) stressed that while a good part of the company’s indebtedness to the power producer was a legacy issue, the management was currently engaged in discussions with Sunon Asogli over an arrangement to settle the debt.
The source said “the debt is beyond just the management of the ECG”, but declined to elaborate, assuring, however, that the company would ensure that it remained in a position to be able to access supply from Sunon-Asogli in order to serve the public.
ECG is the country’s biggest power distributor.
Background
In a letter dated Monday, December 4, 2023, the Sunon Asogli Power (Ghana) Limited Company announced that with effect from 6 p.m. that evening, it was going to shut down its generation indefinitely over unpaid arrears.
It said the difficult decision became necessary due to the avoidable delays in payments from power supplied to the government through the ECG as well as the unproductive engagements to find an amicable solution.
“This is our last resort.
The accumulating unpaid bills have significantly impacted our operational capacities, making it unsustainable to continue without addressing these financial challenges,” the letter signed by the Chairman of the company, Qun Yang, addressed to the Managing Director (MD) of ECG and copied to the Ministers of Energy, Finance, Minister of State and relevant agencies, said.
It explained that ECG’s payment rate based on monthly invoices from January to October this year was 24 per cent, while its receivable balance between December last year and October this year had increased by 76 per cent.
However, by dusk of the same day, the company came out with another correspondence to say it had suspended its planned shutdown by a week following an agreement it had reached with the government.
In a correspondence with the MD of ECG and copied to the same authorities, the company said: “Kindly confirm our understanding that we shall be paid an interim sum of $60 million in two tranches.
The first tranche of $30 million to be paid this week and the second tranche in the week of 11th December 2023.”
The country has been experiencing intermittent power outages this year, some of which boil down to financial challenges to settle fuel costs and arrears owed independent power producers (IPPs).
In March this year, the Independent Power Producers, Ghana (IPPG), issued a reminder to the government to pay arrears due them to enable them to keep their operations running.
The nine IPPs, which control 50 per cent of the country’s generation mix, said the ECG owed them the cedi equivalent of about $1.4 billion as of February this year and wanted the government to urgently settle its indebtedness to them.
Negotiations
The Minister of Finance, Ken Ofori-Atta, has stated that as part of the country’s debt treatment to attain debt sustainability, it will negotiate with the IPPs.
The government believes much of the debt is inherited from the many IPP agreements, almost all of which have take-or-pay clauses, which ties the hand of the state to pay for power whether evacuated, thus consumed or not.
In July this year, the Ghana Grid Company (GRIDCo), operators of the National Interconnected Transmission System, said a deficit in thermal power generation due to limited gas supply from the Atuabo Gas Processing Plant (GPP), and the West African Gas Pipeline (WAPCo) affected power supply.
In a statement issued on Friday, July 7, it said: “This has created a supply gap of 650MW of power at peak time which will affect consumers in some parts of the country”.
